Survey shows search firms are rebounding after six-year decline

By Julie Fishman-Lapin
Staff Writer
Published March 31 2006

It has been a long six years for the executive recruitment industry, which has struggled since the 2000 recession and the Sept. 11, 2001, terror attacks.

But there is finally some good news for headhunters.

A report by Stamford-based Hunt-Scanlon Advisors indicates the recruitment sector is not only back, but experiencing the kind of explosive growth that it saw until the economy cooled and the terror attacks caused businesses to pull back.

The nation's largest 25 search firms increased last year's revenues by 21 percent compared with 2004. It's the second year the group has seen revenues rise 20 percent or more -- setting a pace not seen since the heady days of 2000, said Scott Scanlon, chief executive officer of Hunt-Scanlon, a market research firm and information provider to the recruiting industry.

In the weeks and months after the terror attacks, the search industry went into a steep decline.

"We never saw the industry nose dive as quick as it did in 2001 and 2002," said Scanlon, adding that his firm estimates the sector's revenues plummeted 60 percent following the attacks.

It was a particularly bitter pill to swallow, because the years leading up to the decline saw record-setting revenue growth.

In 2000, the year the recruiting industry hit its peak, the sector's top 25 recruitment firms reported $1.72 billion in revenues. The 2005 survey reports that the top 25 search firms reported revenues of $1.37 billion.

Although there's some ground to make up, "Those are pretty healthy numbers," Scanlon said.

It will take another $345 million in collective revenues, or a 25 percent increase, to bring this group back to the 2000 peak, he said, adding that almost all the executives polled in this year's survey believe that increase will be achieved in this fiscal year.

"By nearly every industry measure and metric, executive recruiters are back to work in a very big way," Scanlon said.

The outlook not only bodes well for the future of the industry, but for the nation's economy as a whole, Scanlon said.

"In many ways the staffing industry is a barometer of the overall health of the economy," he said.

"The market has gotten better -- clearly, much better," said Darren Romano, partner in the global human resource practice at Highland Partners, a retained search firm.

One of the most encouraging signs is that hiring is happening in all sectors, said Romano, who works out of Highland Partners' Stamford office. The financial services sector is on a roll, retail has been booming, and even big industrial, which is usually the last to come back, is on a hiring spree.

Marc Lewis, chief executive officer of Westport-based The Leadership Capital Group, said his firm is seeing an increase in demand by information-intensive businesses for new workers. Within that sector, Lewis said that along with their demand for chief information and technology officers, employers are seeking sales, marketing and customer service executives.

"Five years ago, the only thing anyone cared about were sales executives," he said. "Now, companies are investing in their future by spending on executive talent in marketing, customer service, and research and development."

"When companies came out of the bubble they cut their work forces to the bone, now they are looking to grow," said Romano. "It is hard to grow without people."

For the foreseeable future there seems to be a shortage of talent, said Scanlon. And that means recruiters will remain in demand.

"We are still nowhere near levels of 2000, so a lot of hiring needs to be done," he said.